Electric Vehicles Approaching Price Equivalency with Conventional Gas and Diesel Automobiles on Graph Analysis
Electric Vehicles Approaching Price Parity with Internal Combustion Engine Vehicles
Experts predict that electric vehicles (EVs) are reaching price parity with internal combustion engine (ICE) vehicles in many major markets during 2025. This significant shift is primarily due to declining battery costs and scale economies, particularly for smaller or more affordable EV models.
According to Giles Parkinson, the editor of The Driven, Renew Economy, and One Step Off The Grid, the cost of batteries has fallen dramatically over the years. From $806 per kilowatt-hour (kWh) in 2013, the price has dropped to $112/kWh in 2022. Kobad Bhavnagri, the global head of strategy at BloombergNEF, has also confirmed that the cost of batteries has resumed its downward trend.
Hitting the $100/kWh battery pack cost is widely viewed as the tipping point for EV-ICE price parity. In China, lithium iron phosphate (LFP) battery packs have already dropped below $100/kWh, enabling some EVs to be priced competitively with ICE vehicles. In the U.S. and Europe, prices are approaching parity but still often benefit from government incentives to bridge remaining cost gaps.
In the U.S., the Kelley Blue Book average transaction price in 2025 for EVs is about $59,200 versus $48,700 for gas vehicles, a gap of approximately $10,500 before incentives. However, federal tax credits and state incentives help close this gap, effectively making many EVs close to or at price parity.
Experts expect EVs to reach full ownership cost parity by 2026, factoring in fuel savings and resale value, which could mark a shift to consumer-driven adoption without subsidies. Despite the approaching price parity, U.S. EV market share growth has slowed somewhat, partly due to factors beyond price such as charging infrastructure and product variety.
Giles Parkinson, a journalist with nearly 40 years of experience, owns a Tesla Model 3 and has been the founder and editor of The Driven, Renew Economy, and One Step Off The Grid. He made these statements at the Australian Clean Energy Summit on Tuesday.
The trend of increasing electric vehicle sales is expected to continue in the direction of greater and greater shares. One in four vehicles sold around the world is expected to have a plug. Continued advances in battery technology (e.g., solid-state batteries) and scaling production are expected to further hasten price parity across most classes of passenger vehicles globally within the next few years after 2025.
In the next few years, advancements in battery technology and scaling production may help environmental-science fields, such as those focused on renewable energy, by accelerating the approach of full ownership cost parity for electric vehicles (EVs), potentially leading to consumer-driven adoption without subsidies in the technology sector. In 2025, experts predict that the cost of batteries, a critical component in EVs, will have dropped significantly, potentially making EVs competitive in price with internal-finance investments in traditional internal combustion engine vehicles.
